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The role of Contractual Insurer is often overlooked when bringing or defending a vehicle related claim as the majority of claims fall for consideration as RTA Insurer.

There are circumstances when it is important to assess whether an insurer has standing as Contractual Insurer; particularly if the incident happens off the highway or space where the public has access and Road Traffic Act status does not apply.

In subrogated claims this can present a barrier to recovery as Article 79 status and the MIB cannot entertain subrogated losses because the Claimant has already received the benefit of insurance and the Fund exists for people without a remedy available to them.

Vehicle repairs resulting in fire damage

In R&S Pilling (t/a Phoenix Engineering) v UK InsuranceLtd [2017] EWCA Civ 259 a vehicle narrowly failed its MOT test and was subject to welding repairs by the policyholder in his employer’s workshop garage (with permission) as part of a repair to prepare the vehicle for roadworthiness for another MOT.

During the course of welding works a fire ignited and caused substantial damage valued at £2 million. In short, the cause was due to welding sparks igniting nearby combustibles. Axa paid for the reinstatement for Phoenix Engineering and sought the recover these as subrogated losses.

At the time of the fire the vehicle was in a contained workshop, stationary and not in transit. The Court was asked to look at whether the welding repairs constituted “use” of a vehicle.

The claim failed at first instance largely on the basis the welding repairs were not considered to be “use” of the vehicle. This decision was appealed.

Vehicle insurance

The policy booklet for the vehicle’s insurance stated:

“1a Cover for you

We will cover you for your legal responsibility if you have an accident in your vehicle and:

you kill or injure someone;

you damage their property; or

you damage their vehicle.”

This policy did not have geographical restrictions and indemnified for losses up to £20 million. The policy extended beyond the minimum RTA requirements for cover “on a road or other public place” and cover up to the value of £1.2 million.

The Court of Appeal held that on the issue of policy wording the cover provided by the policy was to be read as extending to all the matters in S145(3) Road Traffic Act 1988.

The policyholder had complied with his policy conditions and the Court looked at the Contractual Insurer position in respect of what cover was provided under the motor insurance policy and cross referenced this with section 145(3) Road Traffic Act 1988, Directive 2009/103/EC of the European Parliament and of the Council of 16 September 2009 and past authorities such as Dunthorne v Bentley [1999] Lloyd’s Rep IR 560 and Vnuk v Zavarovalnica Triglav D.D [2016] RTR 188.

Repairs as part of the “normal function” of a vehicle

It was held by the Court that carrying out repairs to enable the car to be in a safe condition and pass its MOT so the policyholder could continue to use it was consistent with the normal function of a car.

The wording of the EU Directive emphasised vehicle “use” instead of different terms such as “operate” or “drive”. Prior to the fire the vehicle had been driven to the workshop, carefully reversed into the bay and then works were carried out to make it roadworthy to pass a MOT test (that it had only failed the previous day).

The Court allowed the claim as it found the welding works that caused or contributed towards the fire was vehicle “use” because it was consistent with the normal function of the vehicle under Section 145(3)(a) Road Traffic Act 1988.

At paragraph 77 of the judgment the Court expressly allowed an extended view of repairs to be taken when Lord Henderson stated:

“The only observations which I wish to add concern the Commonwealth authorities to which we were referred. Speaking for myself, I have found them of some assistance, because in both Canada and Australia the courts have shown themselves increasingly willing to interpret the concept of “use”, in the context of statutory provisions or policy clauses relating to third party car insurance, broadly enough to encompass the carrying out of (at least) ordinary repairs needed to keep a vehicle in a roadworthy condition.

Main points arising from this decision

“Use” is not restricted to driving a vehicle.

A vehicle can be in “use” when parked and stationary.

“Use” involves anything consistent with the normal function of the vehicle.

Damage “arising out of the use” of a vehicle is not restricted to impact damage and can be consequential.

A law firm is a business. Yes, traditionally it has been a profession, or the practice is considered a vocation, but ultimately it is consistent with all other types of business.

So let’s take a look at other types of businesses.

They focus on leaders and strong management to drive a company forwards. A large number of them will have MBA’s and other qualifications following study at a business school.

Contrast this with law. Aside from completing the management course stage 1 because it’s mandatory; not all solicitors go onto stage 2. This is really a low level of study.

Few law firms will invest the time and resources into management. Lawyers generally do not make great managers.

A typical journey to management in a law firm will involve ‘hanging around long enough’ to become a line manager. At best you may have a few hours of internal “training” by your employer. Then after a lot of hard work, or are lucky to have a face that fits, you get bumped to partner. In charge of budgets, complaints, client contact, etc. What preparation is there for this? Not that much compared to non-law businesses.

Some firms may have a leadership programme, but this is the exception rather than the rule. The best firms arrange for intensive courses in management.

The problem is that fee earning demands and achieving Average Daily Chargeable Hours is prioritised over investing in management training.

If a firm is struggling with their management then look outside of law. Are there transferable managers? They could be worth the risk. Someone with a time-and-motion management background could bring a streamlined approach to process-driven firms.

Just make sure you get the right balance of managers because fee earners busting their backsides view managers that aren’t “on the tools” and bringing in fees as leeches. If you are a manager then make sure you involve the fee earners and make them see tangible results that can really feel.

The message to take away from this? If you are thinking of promoting a person to a supervisory or management position then make sure they are prepared for this and invest some money into their skill set.

There is obviously some merit in increasing the personal injury limits but so many of the commentators at the end of the article make accurate observations.

A lot of people are going to be in a tough position.

Take for example 2 cars involved in a collision causing bent metal and also results in separate injury to a nearby pedestrian walking on the pavement.

On the basis someone (or both) of the drivers is liable…

Driver 1 will have an insurer with in-house claims team, in-house counsel and external legal panel.

Driver 2 will have the same.

Both drivers will have the benefit of access to legal advice. If they cause a big enough complaint the insurer will panic about Treating The Customer Fairly and tell their panel firm to claim for damages to the bent metal and throw in the personal injury claim as well to keep their policyholder placated. It’s easier to push around a panel law firm who depends upon you than add to your policyholder complaint statistics.

The average pedestrian in this example has no immediate lawyer access and returns home praying they have LEI cover. If not, they have to learn the law and procedure to take on 1 or 2 sets of lawyers. A tough challenge. I am not sure a beginners guide to law will cover Sanderson & Bullock Orders.

They could go to the CAB. I am not confident law students and other non-qualified helpers can take on 2 sets of lawyers; plus they are drowned with debt claims and appeals against benefit sanctions.

CMCs? Another option. Hand over 30% of your damages or more. It’s just like what happened in employment tribunals when they allowed rights of audience to anybody and they deducted a nice big chunk of damages from settlements.

So what happens? Realistically the pedestrian has to accept a reduced sum in damages by handling it alone or hand over a percentage of their damages to someone else such as a CMC. Not really access to justice.

Staying on that track. Say the pedestrian’s damages are worth £2,500.00 when they’re hit by the car.

What if the pedestrian was involved in an accident at work shortly beforehand and suffered a similar value claim? They could pursue a claim against their employer’s EL policy with better access to justice. This is because RTA claims will have a £5k limit whereas non-RTA will have a £2k limit. Solicitors will still be willing to run the EL claims as they can make money (using paralegal factories).

Those in low value personal injury who aren’t already preparing their exit strategy should be looking at their options carefully.

Scottish litigation is a new venture in my line of work. Insurers have always considered Scotland to be a black hole where cases go to die. There may be an occasional update closely followed by a large bill.

Case handlers tend to be scared of requesting progress reports for fear of exposing their lack of knowledge of Scottish law.

Insurers also hate it because similar claims are farmed out to English lawyers are rubbish CCFA’s whereas they are lumbered with an hourly rate in Scotland.

Newsflash. The law is not very different between the jurisdictions.

2 key differences are (1) procedure; and (2) funding.

Curiously Scotland is behind the times on certain things but years ahead on others.

For example their Sheriff Court Rules are prehistoric compared to England & Wales, however by contrast they are already where Lord Jackson wants to be with set fees for phases.

Procedure

There are some recent pre-action protocols but they lack teeth outside of personal injury (ASPIC as it’s referred to up here). To provide an example, Professional Negligence claims have an optional pre-action protocol. The cap for this is £20,000 (how far does £20k get you in a prof neg claim?! Many prof neg lawyers won’t have seen a damages claim for £20k since their training contract). To be fair there is an option to use it for damages claims over £20,0000; however at the rear of the Protocol is a fixed fee scale limiting your costs. There is no penalty for a breach and with limited costs entitlement there is no incentive to claimants for using the Protocol. A smart opponent defending the claim would just run the clock down until it become uneconomical for the claimant to continue to pursue the claim.

Procedurally the Sheriff Clerks are miles ahead of Proper Officers and they have a great understanding of law and procedure. The turnaround of paperwork is rapid and many hearings are listed quickly with short return dates. There is no ‘slip rule’ so all paperwork has to be perfect.

Costs (or ‘Expenses’ as they are referred to)

There is little benefit in settling a claim or presenting it on a fair basis at the pre-issue stage. This is a real problem because it encourages litigation. A deal at pre-lit stage sees Chapter 10 fees apply. This is frankly chickenfeed in law firm billing terms. The rewards come by issuing a writ and then adopting a process-driven approach to maximise your entitlement to fees (e.g. adjusting writs, filing numerous inventories of productions, filing motions for lots of specification of documents, making the options hearing go on beyond 30 mins). My favourite is seeing a listing officer being persuaded to list a motion to the end of the list so the advocates sit in Court most of the day picking up waiting time before it’s heard and the winning party collecting a massive fee on a time-and-line basis. Also there is a chance at the end of claim at an assessment (“diet of taxation”) to claim an uplift on costs such as complexity and importance to client. This can see an increase in excess of 100%!

Here is a free tip. If you are against an opponent that is not Scottish qualified and handling a claim, they are not entitled to recover expenses. We recently enjoyed explaining to an opponent that their £80k bill included £50k of time incurred by English solicitors in London and they could not recover this.

Also a point to pick up – if you find yourself as the wrongdoer in the above example – transfer the file without delay because you are not covered by your professional indemnity insurer for carrying out this work. Plus you may be hit with a double deductible as a repeat offender if you face a prof neg claim.

After receiving an email from WordPress highlighting my views had increased exponentially to around 200 a day following a derisory number I was intrigued. Especially in light of a 2 year layoff.

Thank you to Mr Exall for his kind words and for diverting traffic with his link to my trial bundle page. My disappearance was due to changes in my personal life and also a promotion that came with the price of moving 300+ miles away to work horrific hours. Unlike Mr Exall I lack the skills and commitment to produce content on top of a busy caseload. I doff my hat.

Promise to return to legal blogging soon. There is a lot going on in legal procedure, case law and costs that need to be confronted. I will pop a new article up now to get started.

A professional colleague has now analysed the statistics to assess whether the enhanced court fees introduced on 9 March 2015 have affected litigation levels and he makes the following observations:

The rates of litigated personal injury claims have not been affected by the substantially enhanced court fees. The position was ambiguous after the end of Q2.

In Q3 there were 34,192 issued injury claims. That is a 0.6% increase over Q2, and a 1.9% increase over the corresponding quarter of 2014. That said, Q3 of 2015 is 5.8% lower than the level before the last pre fee increase (Q1). And of course while there are plans to raise issue fees further, this does not apply to injury claims.

The number of “unliquidated money claims” which will include commercial cases brought against insurers if not for a specific sum of money are generally at a much lower level than injury claims. But the trend there is towards fewer claims. Q3 at 1,826 is an increase of 4.6% over Q2, but is down 18.6% over the corresponding quarter in 2014, and is a fall of 25.7% from the pre-increase level in Q1. And court fees may increase further for that type of claim.

So in injury claims, while there is some limited evidence of claims transferring between solicitors at the time of proceedings, from one firm which cannot afford the fee to one which can, the cases seem to still be being issued.

Claim worth £9k+, not the most complex but an expert would probably help on causation (e.g. mechanical services engineer or fire expert).

What happens?

Particulars challenged with robust defence.

Defendant makes an offer to settle in open correspondence on a global basis (e.g. £7.5k – £8k)

Notice of provisional allocation to small claims track sent by Court.

The defendant completes the D/Q stating the small claims track is appropriate and no expert is needed

How to dupe the claimant

Make a Part 36 offer by completing the MOJ Part 36 offer form and serve this on the claimant’s solicitor 9say £6k-£7k)

After the claimant’s solicitor accepts the offer send them the settlement cheque for damages

Then, wait a week and tell them you are paying £555 only for the issue fee and fixed small claim costs

How is this possible?

Due to a stupid quirk in the rules:

CPR r 44.9 states a costs order will be deemed to have been made on the standard basis if a Part 36 offer is accepted after commencement of proceedings

CPR r 27.2(1)(g) provides that Part 36 does not apply to small claims and CPR r 27.14 is restrictive in providing that small claims are subject to the fixed costs regime of CPR r 27.14 and CPR Part 45.

CPR r 46.13(3) states that when the court is assessing costs on the standard basis which concluded without being allocated to track it may restrict costs to the costs that the claim would have been allocated to if allocation had taken place.

As the Court sent notice of provisional allocation to the small claims track it means the Court is already against the claimant.

While the claimant will have an authority for costs, CPR r 46.13(3) was an amendment to the pre-1st April rule and now includes cases where there has been no allocation. Prior to this in such cases the O’Berne v Hudson process applied and we had to go through bills line-by-line ascertaining whether costs were reasonable having reference to the fact it would have been a small claim. As provisional allocation indicates that at the allocation hearing this would have been allocated to the small claim, but only in the fast track with a particularly suave tongued barrister. On assessment the Court will go through the same thought pattern.

It’s unlikely a claimant will run the fast track argument due to the risk involved, and coupled with the limited time they would have spent on the claim expecting it to be a small claim with fixed costs, they won’t have front loaded in the same manner as a fast track claim as the Part 36 offer was not expected.

I am interested in whether others have seen anything like this? Would be helpful to have a first instance decision.